Lehman looking at cutting some 1,200 jobs: source

Thu Aug 28, 2008 10:09pm EDT

By Dan Wilchins

NEW YORK (Reuters) - Lehman Brothers Holdings Inc is looking at cutting some 1,200 jobs in its latest round of cost cutting, a person familiar with the matter said, as weak financial markets spur layoffs across Wall Street.

The job cuts would amount to roughly 5 percent of the work force of the fourth-largest U.S. investment bank, which has already announced three other rounds of cuts totaling about 4,000 positions this year.

The precise number of staff to be laid off in this most recent round is still being determined, the person familiar with the matter said. Lehman declined to comment.

Wall Street firms are broadly reeling from the credit crunch and Lehman is no exception. It is looking for buyers for some $40 billion of commercial mortgages and property on its balance sheet.

Investors fear that write-downs of its commercial and residential mortgage assets could be large enough to dramatically reduce the company's net worth, which stood at about $26.3 billion at the end of May.

Over the next 10 days, Lehman may announce a series of steps to boost capital, cut costs and reduce bad assets, wrote Richard Bove, an analyst at Ladenburg Thalmann, in a note to clients. If Lehman does not take these steps, an outsider could buy and restructure the bank in a hostile takeover, he added.

Lehman's shares rose $1.09, or 7.4 percent to close at $15.87 on Thursday. Even with those gains, the company's shares trade at less than half their book value, even as many of its competitors trade at a premium.

Many of Lehman's strongest businesses, ranging from fixed income underwriting to advising on mergers, have been much weaker this year compared with last year.

Given the potentially large write-downs, some of Lehman's critics have charged the company is undercapitalized. The bank has raised roughly $12 billion of capital this year through common equity, preferred stock and convertible securities offerings.

Lehman is looking at raising additional capital by selling a stake in its asset management business, sources have said.

Lehman had about 26,200 employees at the end of May.

(Reporting by Dan Wilchins; Editing by Braden Reddall and Andre Grenon)

UBS to cut bonus payments

ZURICH - UBS plans to cut first half bonus payments to its employees by 4 billion Swiss francs (S$5.14 billion), Swiss newspaper Sonntag CH reported on Sunday without disclosing its sources.

For 2007, the bank had paid in total 12 billion Swiss francs in bonuses despite substantial writedowns and a capital hike caused by the subprime crisis.

A spokesman for the Swiss bank declined to comment on the report but said that bonus payments will 'certainly be lower'.

The cutbacks will mainly affect UBS' investment banking and asset management staff, the newspaper said.

In total UBS reduced staff costs by 5 billion Swiss francs during the first half, as the troubled Swiss bank cuts its headcount by 5,500.

The decision does not come as a surprise in the wake of the investment banking unit's 23.5 billion Swiss franc loss, the newspaper said.

UBS had announced earlier this month that it will separate its loss-making investment bank from its prized wealth management arm, resulting also in a new bonus system.

According to the bank's new plans, bonus payments will no longer be calculated based on the group's overall results but individual segments' performances. -- REUTERS

Merrill Lynch freezes hiring for rest of year: report

Last update: 4:42 p.m. EDT Aug. 14, 2008

By Wallace Witkowski

SAN FRANCISCO (MarketWatch) -- Merrill Lynch & Co. (MER) will institute a hiring freeze for the remainder of 2008, Bloomberg reported late Thursday, citing an internal company memo. The freeze extends to previously budgeted posts and replacement hires, according to Bloomberg. The freeze, however, does not apply to retail brokers, who make up just over a quarter of Merrill's 60,000-person workforce, the news agency said.

Barclays may write down 1.5 billion pounds more, says Goldman

Thu Aug 14, 2008 7:24am EDT

(Reuters) - Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) may need to write down 1.5 billion pounds more over the next 18 months, analysts at Goldman Sachs said adding the British bank has little room to absorb further material losses without the dividend potentially being cut or paid in shares.

Another brokerage, Cazenove, downgraded Barclays to "in-line" from "outperform," citing share price outperformance, and said though the bank had performed well given the disruption in financial markets, it still faces a weak economic outlook and lower balance-sheet gearing.

Goldman Sachs also said it remained concerned about the bank's capital position.

Barclays' interim results were disappointing as the weak underlying performance, excluding Barclays Capital revenue, were only saved by a strong performance on costs, Goldman Sachs said.

Last week, Barclays reported a 33 percent drop in first-half profits after taking a 2 billion pound writedown on the value of risky assets, and said challenging market conditions are likely to last through 2009.

On Barclays' credit market exposures, there is the potential for up to 4.6 billion pounds of further write-downs, Goldman added.

It raised its price target on the stock to 340 pence from 320, and reiterated its "sell" rating.

Cazenove, however, said the British bank's first-half results were less pronounced than at many competitors, and write-downs taken by Barclays were broadly consistent with the range of figures disclosed by rivals.

Barclays was the best performing major European bank in the third quarter, with a share-price rise of 21 percent, Cazenove said.

"It (the shares) now trades at a premium to peers and, with no specific catalyst in view, we expect a period of share price consolidation," it said.

Shares of Barclays were trading down 2 percent at 345 pence by 1033 GMT.

(Reporting by Neha Singh in Bangalore; Editing by Vinu Pilakkott)

UBS rips up one-bank model as rich clients flee

Tue Aug 12, 2008 4:39am EDT

By John O'Donnell and Sam Cage

ZURICH (Reuters) - Swiss bank UBS will separate its wealth management business from investment banking, a move that could herald a spin-off or sale of the business that made it Europe's top casualty of the markets crisis.

The embattled Swiss group unveiled plans on Tuesday to split wealth management from investment banking and asset management as the world's biggest banker to the rich hemorrhaged clients and admitted there were problems with its one-bank model.

It said there had been net new money outflows of almost 44 billion Swiss francs ($41 billion) in the second quarter -- compared with inflows of 34 billion francs a year earlier -- and it racked up a further $5 billion in writedowns on investments. This took its total bill from the markets crisis to $42 billion.

Investors welcomed the reorganization and hoped the worst might now behind the bank, and its shares rose 1 percent to 23.46 francs by 0832 GMT, compared to a weaker European banking sector.

Landsbanki Kepler analyst Dirk Becker said he though the worst of the crisis was over.

"As we believe there will be no further loss-making quarter, considering that the tainted assets have been drastically reduced, there should also be no danger of a further capital increase," he said.

UBS's latest writedown shows it is among banks still unearthing credit market problems, joining U.S. rivals Citigroup

and Merrill Lynch in taking more big hits in the quarter.

They remain the three hardest hit banks and investors are still worried about more subprime exposure.

A year into the credit crisis, banks have lost over $400 billion on assets tarnished by the U.S. subprime housing crisis, but some banks, including Credit Suisse and Royal Bank of Scotland, have indicated they are through the worst.

CLIENTS INCREASINGLY NERVOUS

Many of the UBS's customers -- who prize low-profile stability -- have grown increasingly nervous as bad news from UBS continues to make headlines.

It announced a bigger-than-expected loss of 358 million francs in the second quarter and the departure of its finance chief, Marco Suter, an ally of former chairman Marcel Ospel, who was toppled in the crisis.

Management, which has been engaged in a review of the business, signalled for the first time on Tuesday that it could ditch the investment bank that landed it in trouble although it said there were no plans now to do so.

"It might be that we keep or divest or enter into joint ventures or collaboration," Chairman Peter Kurer told journalists, commenting on the business strategy. "For the time being, there are no plans to divest."

His remarks signify a major change for the bank, which has long stood by its strategy of running asset management, banking for the rich and investment banking together.

UBS has come under continued pressure from investor Olivant, however, to hive off investment banking and the news comes as UBS racked up further writedowns on battered investments and more losses.

UBS's admission that the universal bank model is broken comes just a week after rivals Societe Generale, HSBC and Barclays all defended the model, which has been badly bruised during the credit crunch.

WORST CRISIS

The global markets turmoil has plunged UBS into the worst crisis in its history. As demand for risky mortgages and other debt dried up, the bank has been forced to write down billions of dollars in the value of its investments.

As well as fighting calls for the group's break-up, UBS has also had to defend its conduct throughout the crisis.

UBS said on Tuesday it did not expect to see any improvement in negative economic and financial market trends in the second half of the year and said it would continue to cut jobs.

Last week, it agreed to buy back almost $19 billion of bonds after New York State and others sued it for steering clients towards auction-rate securities - debt which became impossible to sell after the market froze. UBS said this would cost it $900 million.

UBS was expected to post a second-quarter loss of $260 million, according to a Reuters poll conducted before the news of the debt securities buyback.

UBS is also under fire from U.S. congressional investigators, who say the Swiss bank helped U.S. clients dodge taxes.

But UBS's difficulties do not end there. It faces tough new rules later this year from the Swiss banking watchdog that will force it to hoard considerably more capital, putting a brake on capital-intensive investment banking.

The avalanche of problems has smothered the Swiss bank's stock. UBS's share price has tumbled by almost two thirds since the start of the year -- twice that of European peers. (Additional reporting by Albert Schmieder and Steve Slater in London; Editing by Hans Peters)

JPMorgan loses $1.5 billion since July

Tue Aug 12, 2008 2:06am EDT

(Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) incurred losses of about $1.5 billion for the quarter to date, as it continued to be hurt by wider credit spreads, lower levels of liquidity, as well as the disruption in the credit and mortgage markets, the U.S. investment bank said in a regulatory filing.

The third-largest U.S. bank said trading conditions have "substantially deteriorated" in the third quarter compared with those of the second, and spreads on mortgage-backed securities and loans have "sharply widened."

In addition, if the firm's own credit spreads tighten, the change in the fair value of certain trading liabilities would also negatively affect trading results, the company said.

JPMorgan held $16.3 billion of legacy leveraged loans and unfunded commitments as of June 30, the filing showed.

"Leveraged loans and unfunded commitments are difficult to hedge effectively, and if market conditions further deteriorate, additional markdowns may be necessary on this asset class," JPMorgan said.

As of June 30, the company also held an aggregate $19.5 billion of prime and Alt-A mortgage exposure, $1.9 billion of subprime mortgage exposure, and $11.6 billion of commercial mortgage-backed securities (CMBS) exposure, the filing showed.

"These mortgage exposures could be adversely affected by worsening market conditions, further deterioration in the housing market and market activity reflecting distressed sellers," the company said.

Last month, JPMorgan Chase posted a smaller-than-expected drop in earnings on resilient stock and bond underwriting revenue, but cautioned that the mortgage market and the economy were getting worse.

In the Aug 11 filing, the company said it also expects continued deterioration in credit trends for its consumer portfolios, and that this will likely require additions to the consumer loan loss allowance during the rest of 2008.

Quarterly net charge-offs in the home equity portfolio could continue to increase for the rest of 2008, the company said.

Prime and subprime mortgage net charge-offs were likely to continue to rise "significantly" in the second half of 2008, with deterioration expected to continue into 2009, JPMorgan said. Shares of the company closed at $41.89 Monday on the New York Stock Exchange.

(Reporting by Tenzin Pema in Bangalore; Editing by Hans Peters)

Wachovia boosts loss to $9.11 bln, cuts more jobs

Mon Aug 11, 2008 7:02pm EDT

By Jonathan Stempel

NEW YORK (Reuters) - Wachovia Corp increased its previously reported second-quarter loss to $9.11 billion to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.

The fourth-largest U.S. bank is now reporting a loss of $4.31 per share, up from the $8.86 billion, or $4.20 a share, it reported on July 22, according to its quarterly report filed on Monday with the U.S. Securities and Exchange Commission.

Wachovia also now plans to cut 6,950 jobs, 600 more than it had disclosed, with the additional cuts coming from mortgage operations, spokeswoman Christy Phillips-Brown said. The cuts affect about 5.8 percent of Wachovia's 120,000-person workforce. Wachovia also is also eliminating 4,400 open positions.

Separately, Wachovia said the SEC may recommend civil charges against its main banking unit in connection with municipal derivatives transactions. It also said various state attorneys general have issued subpoenas over that matter. The bank said it was cooperating with the probes. Bank of America Corp reported receiving its own subpoenas last week.

The quarter marks the second in a row when Charlotte, North Carolina-based Wachovia revised results to increase the size of its reported loss. Wachovia increased its first-quarter loss to $708 million from an original $393 million because of a write-down tied to life insurance policies.

Auction-rate debt has interest rates that reset through periodic auctions, typically held every seven, 28 or 35 days. Once thought safe, much of the market has been frozen since brokerages in February stopped supporting the debt.

Wachovia said it added $500 million to legal reserves to cover a possible settlement. It is in talks with regulators to resolve matters related to auction-rate debt, after regulatory settlements last week by Citigroup Inc and UBS AG. Missouri is leading the multi-state probe. Wachovia's brokerage unit, Wachovia Securities, is based in St. Louis.

The bank has been among the lenders hardest hit by the U.S. housing crisis, following its $24.2 billion purchase of California mortgage specialist Golden West Financial Corp in October 2006, just as the mortgage market was peaking.

Wachovia expects $525 million to $650 million of restructuring costs for the job cuts.

Chief Executive Robert Steel, a former U.S. Treasury Department official, is trying to cut $2 billion of expenses by the end of 2009.

The bank decided last week to close its mortgage lending offices in 16 U.S. states where it has no retail branches, and in three other states where it has few branches, spokesman Don Vecchiarello said.

Wachovia still has mortgage lending offices in 18 U.S. states, and offers home loan services by phone, Internet and direct mail, he said.

Shares of Wachovia closed on Monday up 28 cents at $18.21 on the New York Stock Exchange. They have fallen 52 percent since the beginning of the year.

(Editing by Leslie Gevirtz and Carol Bishopric)

RBS slumps to loss after $1.35 billion writedown

Fri Aug 8, 2008 3:51am EDT

By Steve Slater and Clara Ferreira-Marques

LONDON (Reuters) - Royal Bank of Scotland fell to a first-half loss of 691 million pounds ($1.35 billion), one of the biggest losses in UK corporate history but not as bad as expected, after taking a 5.9 billion writedown on the value of risky assets.

RBS, Britain's second-biggest bank, said the loss was "a chastening experience" but it was on track to rebuild capital and sales of assets was going as planned.

Fred Goodwin, RBS chief executive, said on Friday the bank was talking to "a number" of potential buyers for its insurance arm, which is valued at 5-6 billion pounds, but he is not reliant on a sale to reach higher capital targets.

By 3:30 a.m. EDT RBS shares were up 2.4 percent at 238 pence, one of the top performing UK stocks, which analysts attributed to a better than expected capital position and resilient underlying results.

The bank swung to the loss from a 5.1 billion pound profit a year ago after being hit by the writedowns on credit products, in line with previous guidance but partially offset by an 812 million pound reduction in the value of debt it carried.

It had been expected to report a 1.2 billion pound loss, based on the average of five analysts' forecasts.

Goodwin said difficult conditions in financial markets "look set to be compounded by a deteriorating economic outlook".

The bank said bad debts on mortgages and other loans jumped 58 percent in the six months to 1.5 billion pounds.

HARD HIT

RBS has had a troubled year and in June it was forced to raise 12 billion pounds in the biggest ever rights issue, to repair a balance sheet stretched by last year's purchase of parts of ABN AMRO and the writedowns.

Asked if he was the right person to lead the bank after some calls for him and his chairman to step down, Goodwin said: "I'm very focused on what we're doing here. We're focused on doing what's right ... to steer the business through a difficult time."

RBS has written down over 8 billion pounds and has been one of the hardest hit banks, but it is not alone.

A year into the credit crunch, banks have written down over $400 billion of assets tarnished by the U.S. subprime housing crisis, forcing them to raise billions from their own shareholders and outside investors.

RBS said its core tier 1 capital ratio was 5.7 percent at the end of June and will be above 6 percent by the end of the year, even if it does not sell its insurance arm.

"Insurance is for sale, we would like to conclude a sale and we believe our disposal process is on track," Goodwin said. "But if we don't get the value we are looking for we are not going to sell and we are fairly confident of meeting our capital targets."

RBS said its underlying profit fell 3 percent to 5.1 billion pounds.

(Editing by David Cowell)

Barclays profit slumps by a third

Barclays has reported a 33% drop in pre-tax profits for the first half of 2008 - as it reported more writedowns linked to the credit crunch.

The bank made £2.75bn profit - down from £4.1bn - a decline it described as "acutely disappointing".

It wrote off £1.1bn from exposure to US sub-prime mortgages and other credit market problems.

Barclays recently raised £4.5bn from investors to increase the strength of its balance sheet.

The bulk of shares were sold to major overseas and institutional investors, led by Qatar, China and Singapore.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7546544.stm

Published: 2008/08/07 06:35:01 GMT

BNP profits hit by write-downs

French bank BNP Paribas has seen its second quarter profit fall by 34% as a result of write-downs related to the global credit crunch.

The firm said net income for the three months to the end of June dropped to 1.5bn euros ($2.3bn; £1.2bn), from 2.3bn euros a year earlier.

Profits at its investment banking arm more than halved to 523m euros after it took an asset write-down of 542m euros.

The bank has not been as badly affected by the credit problems as its peers.

Despite the continued problems in the financial markets, BNP Paribas chief executive Baudouin Prot said that the bank was well capitalised and would not need to tap its shareholders for extra cash.

The results come after its smaller rival Societe Generale reported a second-quarter profit fall of 63% to 644m euros.

Societe General in profit slump

French bank Societe Generale has reported a 63% fall in second quarter profits after the credit crunch hit its investment banking arm.

Net profits fell to 644m euros ($1bn; £510m) from 1.744bn a year before.

Many banks have seen profits hit hard as financial markets have deteriorated and defaults have risen.

On top of suffering from the credit crisis, Societe Generale was hit by a rogue trader scandal last year that it said had cost it 4.9bn euros.

While Societe Generale has blamed trader Jerome Kerviel for the 4.9bn-euro loss as an "isolated" incident, there have been criticisms over a lack of internal oversight at the bank.

Societe Generale said its corporate and investment banking arm made a 186m-euro loss in the quarter, down from a profit of 721m euros in the same period a year earlier.

The profit fall at the French bank comes a day after HSBC, Europe's largest bank, reported a 28% fall in half-year profits and warned that financial conditions were at their most difficult "for several decades".

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7542252.stm

Published: 2008/08/05 06:59:10 GMT

Warning as HSBC profits fall 28%

HSBC has warned that conditions in financial markets are at their toughest "for decades" after suffering a 28% fall in half-year profits.

Europe's largest bank saw profits drop by $3.9bn to $10.2bn (£5.2bn) in the first six months of the year, as its North American arm made a $2.8bn loss.

The firm announced $3.7bn in fresh credit writedowns.

HSBC has been among the banks worst hit by the credit crunch, whose financial toll has run into the many billions.

It has already announced writedowns in the value of its assets - linked to the slump in the US housing market - of more than $15bn.

US exposure

Despite the steep fall in profits, HSBC said its performance had been "resilient" given the prevailing market turbulence.

HSBC saw profits rise in Europe, Asia-Pacific and Latin America in the first six months, but problems in the US weighed heavily on its balance sheet.

Of Europe's top banks, HSBC has among the heaviest exposure to the troubled US housing and credit markets.

Its credit writedowns so far this year have now risen to $10bn, compared with $6.3bn in the same period last year.

'Unsustainable'

Unlike many other British banks, HSBC has not been forced to ask its shareholders for extra cash to bolster its balance sheet.

However, the firm said it had not been "immune" from the liquidity and credit crisis afflicting the global banking sector.

It said the outlook for the banking sector remained "highly challenging" and said changes in bank lending practices and financial regulation were needed.

"It is clear that growth models in our industry based on high and increasing leverage will no longer be sustainable," said chairman Stephen Green.

"It is also clear that complexity in financial services and the recent consequences of failed risk management need to be addressed.

"Ultimately the real economy will recover from the crisis although it may get worse before it gets better. Financial markets will not, and should not, return to the status quo ante."

Fortis profit halves in turbulent second quarter

Mon Aug 4, 2008 4:33am EDT

By Reed Stevenson and Gilbert Kreijger

AMSTERDAM (Reuters) - Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz), the Belgian-Dutch financial group, said writedowns helped cause a halving in second-quarter net profit, and said shoring up a weakened balance sheet was its "top priority".

Fortis (FOR.AS: Quote, Profile, Research, Stock Buzz), which has replaced top management and pledged better communication with investors after surprising them with an emergency solvency plan, reported on Monday net profit of 830 million euros ($1.3 billion) for the quarter, compared with 1.6 billion a year earlier.

Shares in Fortis fell 2.5 percent in Brussels to 9.08 euros, while the DJ Stoxx Banking Index was down 1.1 percent.

"We should be aware that the credit crisis is not behind us yet," Chief Executive Herman Verwilst said, adding that strengthening the financial group's capital base was the "top priority of senior management today."

Writedowns related to credit market turmoil totaled 362 million euros, Fortis said, adding that its structured credit portfolio stood at 41.7 billion euros at the end of June, down 1.6 billion from the end of the first quarter. Capital gains helped to shore up quarterly earnings.

Analysts polled by Reuters had, on average, expected a second-quarter net profit of 754 million euros.

Reflecting uncertainty over the degree of writedowns, analysts' forecasts ranged widely between 524 million and 1.06 billion.

Rabo Securities analyst Cor Kluis said profit, adjusted for capital gains and other charges, came in lower than expected, but the "rest of the bank earnings quality was good due to in line net interest income, commission income and expenses."

FULL TRANSPARENCY

Fortis's latest woes began in late June, when it announced a plan to sell shares and suspend its interim dividend to strengthen its finances. Chief Executive Jean-Paul Votron was replaced by his deputy, Verwilst, and Fortis began searching for a long-term successor.

Fortis said it had a core Tier 1 capital adequacy ratio of 7.4 percent at the end of the quarter.

Chief Financial Officer Lars Machenil said the ratio would remain above the bank's target level of 6 percent at the end of 2009 as it integrates businesses from ABN AMRO and raises capital for its part in the three-bank, 70-billion-euro buyout of ABN.

Last Friday Fortis announced a further shake-up of top management, with Machenil replacing former CFO Gilbert Mittler. The group also said it would hold shareholder meetings in the second half of August to communicate its plans and strategy.

"I consider it crucial to strengthen the communication with our stakeholders and will update the market in full transparency on progress made," Verwilst said.

Fortis shares have fallen 62 percent in the past year, compared with a 40 percent drop in the banking index. Fortis is trading at 5.4 times projected 2008 earnings, among the lowest in the sector. European banks are trading at an average price-earnings multiple of 8.2.

(Additional reporting by Darren Ennis in Brussels; Editing by David Holmes and Quentin Webb)

Deutsche Bank credit rating cut to AA- at Standard & Poor's

Last update: 8:07 a.m. EDT Aug. 1, 2008

By Simon Kennedy

LONDON (MarketWatch) -- Rating agency Standard & Poor's said Friday it has downgraded its long-term counterparty credit rating on Deutsche Bank (DE:514000 58.67, -0.83, -1.4%) to AA- from AA with a negative outlook. S&P said the cut followed Deutsche Bank's announcement of further write-downs and impairment charges totalling 2.3 billion euros ($3.6 billion) in the second quarter. "The downgrade reflects that we no longer consider Deutsche Bank's performance to be materially stronger than that of the leading peers in the currently difficult operating environment," S&P said.